BIS marks CBDC pilot as ‘successful’ with $22M transacted

September 28, 2022 Coin Telegraph

<div>BIS marks CBDC pilot as 'successful' with M transacted</div>

BIS

Over $12 million in value was issued in the pilot with commercial and central banks in Hong Kong, Thailand, the UAE and China taking part.

A multi-jurisdictional Central Bank Digital Currency (CBDC) pilot has been marked “successful” by the Bank for International Settlements (BIS) after a month-long test phase that facilitated $22 million worth of real-value cross-border transactions.

The central banks of Hong Kong, Thailand, China and the United Arab Emirates (UAE) took part in the pilot program along with 20 commercial banks from those regions.

More than $12 million worth of value was issued onto the test platform, which facilitated 164 foreign exchange transactions and cross-border payments between the participating firms totaling over $22 million worth of value according to a Tuesday LinkedIn post from the BIS.

*Graphic from the BIS on the CBDC pilot. Source:* *LinkedIn*

Daniel Eidan an advisor and solution architect at the BIS said the pilot focused on wholesale CBDC cross-border payments and the role the central banks have on the platform, adding “we will likely consider more commercial aspects in the future stages of our work.”

The platform, known as “mBridge” short for Multiple CBDC (mCBDC) Bridge is a part of Project Inthanon-LionRock, a distributed ledger technology (DLT) CBDC cross-border payment project launched initially in Sept. 2019 involving the Thai and Hong Kong central banks.

With the first pilot of the platform now completed the project has moved into its third and final stage before a minimum version of the product with only the platform's core functionality is put to market.

A fully-functional CBDC cross payments platform will only be ready after revisions are made taking into account the feedback from the minimum version, according to a Sept. 2021 BIS report.

The BIS added that a detailed progress report on mBridge will be released in October which will discuss technical design, legal, policy and regulatory considerations along with a future roadmap of mBridge.

A June report by the BIS revealed around 90% of central banks are investigating the adoption of CBDCs. Currently, 11 CBDCs have launched, 15 are in a pilot stage and 26 are in development according to the CBDC tracker from think tank Atlantic Council.

Crypto’s adaptability, openness key to ideal monetary system, say BIS execs

September 3, 2022 Coin Telegraph

BIS

Some of the biggest flaws preventing present-day cryptocurrencies from mainstream adoption, pointed out by the BIS execs, are bottleneck congestion in DeFi and the reliance on volatile assets.

Governments across the globe see central bank digital currencies (CBDC) as a means to improve the existing fiat ecosystem. Cryptocurrency’s technical prowess supported by the central bank’s underlying trust is key to enabling a rich monetary ecosystem, suggests an International Monetary Fund (IMF) publication.

“Digital technologies promise a bright future for the monetary system,” reads the publication attributed to IMF deputy managing director Agustín Carstens and BIS executives Jon Frost and Hyun Song Shin.

A BIS study from June revealed that cryptocurrencies outdo fiat ecosystems when it comes to achieving the high-level goals of a future monetary system.

Some of the most significant flaws preventing present-day cryptocurrencies from mainstream adoption, pointed out by the BIS execs, are bottleneck congestion in decentralized finance (DeFi) and the reliance on volatile assets.

Both wholesale and retail CBDCs can potentially inherit abilities from the crypto ecosystem that benefit end users, the post highlighted:

“By embracing the core of trust provided by central bank money, the private sector can adopt the best new technologies to foster a rich and diverse monetary ecosystem.”

It further recommended central banks utilize innovations such as tokenization to allow purchases using multiple fiat currencies — further benefiting merchants and customers.

The IMF’s gloomy forecast predicting a global economic slowdown raised concerns about an incoming recession in the crypto markets. Cointelegraph previously reported that Bitcoin (BTC) markets were likely to recover when the uncertainty about the current state of the economy and geopolitical tensions are resolved.

However, the IMF pointed out that the various liquidations, bankruptcies and losses at major firms like Celsius, Three Arrows Capital and Voyager Digital Holdings had only a minor impact on traditional financial systems.

BIS committee and IOSCO issue guidance for regulation of stablecoin arrangements

July 13, 2022 Coin Telegraph

BIS

The international organizations affirm the "same risk, same regulation" principle by extending decade-old rules to the rapidly expanding new financial technology.

The principle of "same risk, same regulation" for crypto received further confirmation with the release Wednesday of new guidance on stablecoin arrangements (SAs). The guidance, issued by the Bank for International Settlements (BIS) Committee on Payments and Market Infrastructures (CPMI) and International Organization of Securities Commissions (IOSCO), applies the Principles for Financial Market Infrastructures (PFMI) for payment, clearing and settlement systems to systemically important SAs that transfer stablecoins.

The document is intended for use by SA designers and operators and extends the PFMI standards to SAs without establishing new standards. It notes:

“An SA may need to make changes to its rules, procedures, governance arrangements and risk management framework taking the guidance into consideration in order for its practices to be consistent with the PFMI.”

It defines a stablecoin arrangement as “an arrangement that combines a range of functions to provide an instrument that purports to be used as a means of payment and/or store of value.” The guidance suggests considerations for determining which SAs it applies to, since only to SAs that are “systemically important” are covered by it.

The PFMI were created in response to the 2008 financial crisis and published in 2012. All the standards apply to SAs under the new guidance, although the authors chose to elaborate on the application of only four out of the 24 principles and key considerations: governance, risk management, settlement finality and money settlements. They noted that a separate work will be issued to cover multicurrency SAs.

United States commodity Futures Trading Commission commissioner Caroline D. Pham, co-chair of the CPMI-lOSCO Policy Standing Group, said in a statement Wednesday, “This report is a significant step to establish international standards for stablecoin arrangements and a cohesive regulatory framework that safeguards the global financial system.”

Other institutions are working on stablecoin regulation as well. The Financial Stability Board is expected to propose international regulations for stablecoins in October. In the U.S., the Stablecoin TRUST Act has been introduced to regulate stablecoin and integrate them into the financial system.

G20 regulator to present global crypto rules in October 2022

July 11, 2022 Coin Telegraph

BIS

The FSB seems more concerned with the crypto market given its recent turmoil and the “increasing interconnectedness with the traditional financial system.”

The Financial Stability Board (FSB), a global financial regulator including all G20 countries, is preparing to propose international regulations for cryptocurrencies and stablecoins in October.

The FSB on Monday issued a statement on the international regulation and supervision of crypto asset activities, announcing a major crypto regulation effort.

The watchdog is planning to report to the G20 finance minister and central bank governors in October 2022 on regulatory and supervisory approaches to stablecoins and other crypto assets. By that time, the FSB targets a public consultation report on the review of recommendations, including “how existing frameworks may be extended to close gaps and implement the high-level recommendations.”

The G20 authority also plans to submit another public consultation report that proposes recommendations for promoting global consistency of regulatory and supervisory approaches to other crypto-assets.

“These combined efforts of the FSB and the international standard setting bodies are aimed at minimizing the risk of fragmentation and regulatory arbitrage,” the FSB noted.

According to the statement, the FSB’s growing interest in crypto regulations came due to the recent decline in cryptocurrency markets. The market turmoil has highlighted the issue of crypto’s “increasing interconnectedness with the traditional financial system,” the regulator said.

“It may have spill-over effects on important parts of traditional finance such as short-term funding markets,” the FSB stated, adding that global regulators need to supervise crypto markets in line with the principle of “same activity, same risk, same regulation.”

As such, a stablecoin that enters the mainstream of the financial system needs to comply with “high regulatory and transparency standards, maintain at all times the reserves that preserve stability of value and meet relevant international standards,” the FSB stated.

The FSB’s plan to propose recommendations for global unified stablecoin regulation is quite a challenging task, according to some industry executives.

Narek Gevorgyan, CEO at crypto data provider CoinStats, pointed out that the FSB has no lawmaking powers but promises to fit crypto assets into existing legal frameworks of participating member countries. In a statement to Cointelegraph, Gevorgyan questioned the regulator’s ability to embrace all regulatory approaches and protocols, stating:

“Existing legal frameworks can help regulate the speculative aspects of the market and centralized exchanges, but how does the FSB plan to integrate the hundreds of existing and newly emerging protocols that are radically resistant to regulation by design?"

The FSB previously outlined multiple risks stemming from the cryptocurrency industry in February this year. The authority was specifically concerned about the potential failure of certain stablecoins, the issue of data gaps in the crypto industry as well as the potentially threatening outcomes of the rapid growth of decentralized finance.

Not the best week for crypto lending: Law Decoded, June 20-27

June 28, 2022 Coin Telegraph

BIS

The Celsium failure continues to draw attention to the lending issues from regulators and community.

Due to Celsius Network’s withdrawal suspension in mid-June, the very topic of crypto lending made its entryway to the acute issues list for the regulators. Last week, lawmakers and officials continued to raise the question of necessary action, with significant utterance belonging to one of the key European crypto skeptics, Christine Lagard.

European Central Bank president got so impressed with the Celsius crisis that she coined the term "MiCa II," referring to the main regulatory package for crypto in the European Union. Lagarde believes the new MiCa should include separate crypto-asset staking and lending guidelines.

It’s not necessary to be a civil servant to discern the flaws of the current lending model, though. A hardcore Bitcoin (BTC) maximalist and Swan Bitcoin CEO Cory Klippsten is afraid that the liquidity crisis involving Celsius may be just the beginning of a broader collapse in the crypto lending space. “Their loan books are opaque. Their activities are opaque. You’re being way under-compensated for the risk,” he explained in an interview with Cointelegraph.

90% of Central Banks are researching the utility of CBDCs

If you pick any central bank in the world, there is a 90% probability that it has been researching or testing its own digital currency project for some time. At least, that is what the new annual economic report published by the Bank of International Settlements (BIS), says. However, the numbers are way more modest when it comes to currently functioning CBDCs — there are currently only three live retail digital currencies and 28 pilots.

Disclosures should be read, not just filed

The headline above, summed up in the words of Georgetown University law professor Christopher Brummer, could be read as a motto for last week’s hearing on digital asset regulation at the United States House of Representatives. Although it should have focused on gaps in the oversight and regulation of derivatives and underlying spot markets, the discussion ranged widely. Brummer pointed out that disclosure law assumes issuers have access to information consumers do not have, while blockchain is transparent but hard to understand.

SEC and CFTC will try to understand each other

U.S. Securities and Exchange Commission (SEC) chair Gary Gensler revealed his negotiations with his colleagues from Commodity Futures Trading Commission (CFTC). Two major regulatory bodies in the U.S. are working on a “memorandum of understanding” on the regulation of digital assets. “I’m talking about one rule book on the exchange that protects all trading regardless of the pair — [be it] a security token versus security token, security token versus commodity token, commodity token versus commodity token,” Gensler explained.

Crypto resonates better with BIS’ vision of ideal monetary system

June 22, 2022 Coin Telegraph

BIS

The report awarded points to the fiat ecosystem for the safety and stability policy while highlighting that “Public oversight has helped achieve safe and robust payment systems.”

In its continued efforts to identify the ideal future monetary system, The Bank of International Settlements (BIS) revealed the edge of the crypto ecosystem over the present-day fiat economy when it comes to fulfilling the policy goals.

While sharing its vision for the future monetary system, the BIS outlined eight high-level goals it hopes to achieve — safety and stability, accountability, efficiency, inclusion, user control over data, integrity, adaptability and openness. In its study, BIS found the crypto ecosystem outweighs the traditional finance when it came to broadly fulfilling the policy goals.

High-level goals of the monetary system set by the BIS. Source: BIS

The above table shared by the BIS shows that the current-day fiat economy is far from meeting the requirements of an ideal monetary system. The report awarded points to the fiat ecosystem for the safety and stability policy while highlighting that “public oversight has helped achieve safe and robust payment systems.”

The cryptocurrency ecosystem, however, broadly fulfilled two of the eight policies laid down by the BIS — adaptability and openness. In addition, the report suggested improvements in the inclusion and user control over data policies, which would result in the crypto ecosystem fulfilling half of BIS’ recommendation for an ideal monetary system.

The BIS currently banks on the rise of central bank digital currencies (CBDC) to counter the mainstream adoption of cryptocurrencies. Its vision for the future monetary system involves the use of multi-CBDC arrangements with new data architectures that provide better privacy and control while serving the unbanked.

The BIS Innovation Hub recently shared plans to launch a market intelligence platform as a reaction to the collapse of numerous stablecoins projects and decentralized finance (DeFi) lending platforms. The platform aims to serve as an alternative to unregulated firms for providing data on asset backing, trading volumes and market capitalization.

The Bank of Israel recently commenced its first technological experiment with a CBDC, which examined user privacy and the use of smart contracts in payments.

While the experiment was riddled with a myriad of technical issues, it also highlighted the need to establish a Know Your Customer and an Anti Money Laundering system through a centralized database.

BIS Releases Report Criticizing Crypto

June 21, 2022 The Crypto Briefing

BIS: 90% of Central Banks are researching the utility of CBDCs

June 21, 2022 Coin Telegraph

BIS

The institution's future monetary vision includes exploring innovations grounded in trust in central banks' stable sovereign currencies and safe payment systems.

In a new annual economic report published by the Bank of International Settlements (BIS), the financial institution revealed that approximately 90% of central banks worldwide are investigating the feasibility of adopting central bank digital currencies, or CBDCs.

The BIS report highlighted the ability of current sovereign fiat money to provide (relative) price stability and public oversight while criticizing crypto's inability to perform "basic fundamental functions of money" and their opacity with regards to accountability to the general public.

However, the report did highlight crypto's programmable nature as well as the borderless elements of decentralized finance (DeFi) as potential benefits that would make a case for integration into CBDCs. There are currently three live retail CBDCs with 28 pilots. The digital yuan issued by the People's Bank of China currently holds the dominant position with 261 million users. In addition, over 60 jurisdictions have fast retail payment systems.

In making a case for the use of centralized digital assets, BIS cited recent adverse developments in the DeFi sector. One such example in the report is the implosion of Terra (LUNA) — now renamed Terra Classic (LUNC) — and Terra USD algorithmic stablecoin. Next, BIS went on to highlight the limited scalability of certain blockchains, such as Ethereum (ETH), causing network congestion and thereby sharp increases in transaction fees.

It also raised the question of the feasibility of layer-1 solutions due to the significant fragmentation of such blockchains to address such drawbacks. Finally, the report pointed to a record amount of cryptocurrency hacks in the past year as part of digital assets' inherent safety risks.

BIS to launch market intelligence platform amid stablecoin, DeFi collapse

June 19, 2022 Coin Telegraph

BIS

BIS’s cryptocurrency market intelligence platform will be launched under the Eurosystem Centre initiative to provide vetted data about crypto projects.

The Bank for International Settlements (BIS) Innovation Hub announced the launch of a new set of projects targeting various aspects of traditional and crypto payments — including a cryptocurrency market intelligence platform and security for retail central bank digital currency (CBDC).

BIS’s cryptocurrency market intelligence platform will be launched under the Eurosystem Centre initiative, which aims to provide vetted data about crypto projects. One of the key drivers for the project’s commencement is the collapse of numerous stablecoins projects and decentralized finance (DeFi) lending platforms such as Terra (LUNA) and Decentralized USD (USDD). As explained in the official announcement:

“The project's goal is to create an open-source market intelligence platform to shed light on market capitalisations, economic activity, and risks to financial stability.”

The move goes against the norm of relying on self-reported information by unregulated firms when it comes to data on asset backing, trading volumes and market capitalization. The BIS also highlighted the ease with which quantum computers can break the cryptography used by traditional financial institutions to secure and settle payments. As a result, a Eurosystem Centre project will be dedicated to testing several cryptographic solutions and examining the overall performance of the traditional system.

Moreover, BIS’s Sela initiative will explore technological solutions for allowing CBDC issuance via intermediaries while ensuring greater security and lower costs. The BIS Innovation Hub’s Hong Kong Centre will also collaborate with the United Nations Framework Convention on Climate Change (UNFCCC) to develop the prototype for the second phase of its green finance project, Genesis:

“In this new phase, blockchain, smart contracts and other related technologies will be used for the tracking, delivery and transfer of so-called digitised Mitigation Outcome Interests - de facto carbon credits recognised under national verification mechanisms compliant with the Paris Agreement - attached to a bond.”

Cointelegraph recently attended the UNFCCC’s DigitalArt4Climate press conference to understand the various blockchain initiatives that actively fight climate change.

Ukraine joined Norway and Liechtenstein to become the third non-EU country to join the European Blockchain Partnership (EBP), an initiative derived by 27 member states to deliver cross-border public services.

Speaking to Cointelegraph, Konstantin Yarmolenko, the founder and CEO of Virtual Assets of Ukraine said:

“Next step is full blockchain integration of Ukraine and EU based on EBP/EBSI initiatives.”

Regulators Need To Establish Whether MEV Is Illegal: BIS Report

June 17, 2022 The Crypto Briefing

BIS

90% of Central Banks are researching the utility of CBDCs

Disclosures should be read, not just filed

SEC and CFTC will try to understand each other

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